Fintuity Review of Investment Markets. Quarter 2, 2025

The second quarter of 2025 delivered considerable market volatility as global investors contended with uncertainty surrounding trade policies and conflict in the Middle East. Despite these headwinds, many major asset classes managed to post positive returns, underpinned by solid economic data and a rebound in investor confidence.

Trade Tensions and Market Recovery

April began with sharp market turbulence triggered by an unexpected announcement of new tariffs. The reciprocal measures were broader than anticipated, prompting steep declines in both equity and bond markets. Notably, the S&P 500 dropped 12% within a week, while yields on US 10-year Treasuries rose by 50 basis points between early and mid-April.

However, subsequent efforts to ease trade tensions, including a pause on the tariffs and progress toward a trade agreement, helped calm market nerves. As a result, risk assets recovered, with developed market equities delivering total returns of 11.6% over the quarter.

Investors seeking guidance on how such macroeconomic shifts affect portfolios might consider engaging a financial adviser. Book a meeting with an adviser to discuss building a resilient investment strategy tailored to your circumstances.

Technology Rally and Global Equities Performance

Renewed confidence and a robust earnings season boosted technology stocks significantly. After a weaker first quarter, major global tech shares surged, leading global growth stocks to a total return of 17.7% and positioning them as the top-performing asset class.

Meanwhile, the US dollar weakened further, dropping 7.1% during the quarter, which enhanced returns for international investors holding assets denominated in other currencies. Emerging market equities particularly benefited from the easing trade backdrop and a softer dollar, delivering a total return of 12.2%.

Despite geopolitical concerns stemming from conflict in the Middle East, broader commodity markets underperformed, with oil prices ultimately settling lower at $68 a barrel by quarter-end, down from a temporary spike driven by geopolitical tensions.

Regional Market Insights

Global equity markets broadly finished the quarter in positive territory. The S&P 500 was the top-performing major index in local currency terms, gaining 10.9%. However, the weakening dollar boosted the appeal of emerging markets and Asian equities, with local currency returns of 8.7%, and even higher gains in dollar terms.

European equities rose modestly by 3.6% in local terms, yet dollar-based investors benefited from currency effects, lifting returns to 12.7%. The UK market, while facing challenges due to significant exposure to sectors like energy and healthcare—which were global laggards—still delivered a respectable return of 4.4% in the FTSE All-Share.

For those looking to diversify portfolios internationally or understand the impact of currency movements, working with an independent adviser can help identify the best opportunities across global markets. Book a meeting with an adviser for insights on aligning your investment approach with your long-term goals.

Fixed Income Developments

Fixed income markets reflected the quarter’s mixed macroeconomic signals. Global inflation-linked bonds emerged as the top-performing sector, with returns of 4.7%, driven partly by currency dynamics enhancing the dollar value of international cash flows.

Following the tariff-related market turbulence in April, credit spreads tightened once more, supporting global investment-grade credit returns of 4.4% over the quarter. US high-yield bonds also performed strongly, outperforming European high yield by delivering 3.6%, bolstered by higher yields and tighter spreads.

European government bonds outpaced their US and Japanese counterparts, aided by the European Central Bank’s rate cuts in April and June, which reduced the deposit rate to 2.0%. Italian bonds, in particular, benefited from spread tightening and returned 2.9% over the quarter.

Outlook and Investor Considerations

While markets have largely shaken off the initial shock of tariff announcements, significant risks remain on the horizon. US policy continues to be a key driver of global volatility, with fiscal developments such as the proposed “One Big Beautiful Bill Act” potentially adding substantial federal debt in the coming decade. Meanwhile, the true economic impact of tariffs is likely to become clearer over the next six months.

Given such uncertainty, investors should prioritise constructing well-diversified portfolios to protect against a wide array of potential outcomes. Partnering with a certified adviser or independent financial advisor can help you navigate these complexities while managing key objectives such as retirement planning, pension optimisation, protection strategies, and overall investment performance.

To explore how you can build a portfolio aligned with your personal goals and to find financial adviser services offering the best blend of expertise, fees transparency, and tailored advice, book a meeting with an adviser today.

Founded in 2017, Fintuity has fast become one of the only digital Independent Financial Advisers (IFA) in the United Kingdom.  Fintuity offers a wide range of financial advisory services including pensions, protection, investments and mortgage advice. The key difference is that as an exclusively digital service, we can offer significant savings and a service that is direct to you and on demand.